The impact of migration on access to housing and

the housing market

A project for the Migration Advisory Committee

FINAL REPORT

16 December 2011

Christine WhiteheadAnn EdgeIan GordonKath ScanlonTony Travers

Members of the Migration Advisory Committee (MAC) and its secretariat met and corresponded with the researchauthors in order to develop and steer this research project. However, the robustness of the analysis is the responsibilityof the authors, and the findings and views presented in this report do not necessarily reflect those of the MAC.

TABLE OF CONTENTS

Executive summary

Introduction

Tiers 1 and 2 migration: the Points-Based System

Findings from existing research

Empirical methodology

Quantitative findings from administrative sources

12

Quantitative findings from the Annual Population Survey

23

Qualitative findings

37

10

Conclusions

43

Annex A

Requirements for Tiers 1 and 2 visas

45

Annex B

Online questionnaires to estate agents

51

References

55

1. Executive summary The main objective of the research was to analyse the possible impact of Tier 1 and Tier 2migrants on the market for housing and access to that market.

The numbers involved are relatively small as compared to the total number of immigrantsoverall. However they are likely to be in relatively skilled and well paid jobs and to beconcentrated in particular locations.The administrative evidence points to around 30,000 Tier 1 and 2 entrants per annum whoexpect to stay for more than one year. Including dependants, the total number of immigrantsis estimated at around 45,000.Existing literature has little to say about this type of migrant as much of the research relatesto refugees, asylum seekers and poorer migrant households. What we do learn is that in theearly years even better off migrants tend to form fewer households as compared to theindigenous population; to live disproportionately in private renting; and to live at higherdensities. However the longer they stay, the more their housing consumption resembles thatof similar indigenous households.The methodology employed included estimating the number of migrants and their length ofstay; characterising these migrants in terms of attributes relevant to housing decisions; usingpast evidence to judge their likely impact on housing demand in terms particularly of tenureand location; assessing likely price and supply responses; and thus identifying significanteffects on the housing market.The majority of the analysis was quantitative, using the Quarterly Labour Force Survey/Annual Population and the Survey of English Housing. We also carried out qualitativeresearch through a web based survey and interviews with companies and agents.Tier 2 migrants were found to be concentrated in London, Reading, Ipswich and Aberdeen but even in these areas made up a small proportion of the housing market and transactions.Evidence on length of stay, based on past experience, was that after five years nearly 30%of Tier 2 equivalent migrants achieved permanent status .This excludes intra-companytransfers who do not have the right to apply for such status.Among visa holders perhaps 75% or so form separate households in the first year. The restwill mainly share private rented accommodation.Migrants tend to be younger than the general population and to be either single persons orcouples. Over time the proportion forming households and their household structure movesmore towards the UK average.Initially perhaps 70% live in the private rented sector with only 20% becoming owneroccupiers. This tenure mix changes only slowly - with owner-occupation rising to 45% after 5years. This implies that the most important impact is on the rented sector, especially giventhe extent of turnover among migrants.Starting from 2011/12 and assuming constant levels of entry, by 2017 our estimates suggestthat perhaps 112,000 additional households will have entered and remained in the UK to thatdate. This compares to around 1.5 million additional households in the UK overall during thesame period.Qualitative evidence points to competition for housing being strongest with other migrants.But overall the impact even on local markets was seen as small.The impact on house prices of the accumulated increase in Tier 2 type immigrants over afive-year period is likely to be well below 1%. This might generate some transfer ofproperties to the rented sector but the effect on total new supply is likely to be very limited.1

2. IntroductionThe brief for this project requires us to improve the existing evidence base on how the housingmarket and access to housing are affected by

the total inflow of migrants into the UK; and particularly by

economic migrants from outside the European Economic Area1, specifically those coveredby Tiers 1 and 2 of the current Points-Based System.

The emphasis of this research is on the effects on the housing market of economic migrants fromoutside the EEA rather than on effects of more general migration from within the EEA, or ofrefugees and asylum seekers from outside the EEA. However, much of the existing data do notdistinguish effectively between these groups. It is also important to compare demand generated bythe different groups.The main issues we were asked to address in this report area) the levels of demand from Tiers 1 and 2 migrants for the three main sectors of the housingmarket (owner-occupation, private renting and social housing), especially those in regionsand localities where such migrants are concentrated;b) the impacts of this demand on prices, additions to supply, and availability of housing inthese sectors; andc) how migrants demand differs from that of UK residents and how it affects the access ofexisting residents to housing.The focus on economic migrants from outside the EEA who are expected to take up relativelyskilled (and well paid) jobs differs from the balance of previous research, which has tended eitherto be directed at the character and impacts of aggregate flows or at other sub-groups (e.g.economic migrants from A8 countries within the EEA, non-economic migrants such as refugeesfrom outside the EEA, or recruits into mostly relatively unskilled/low paid jobs from outside theEEA).By contrast with the subjects of much of this work, the group of Tiers 1 and 2 migrants from outsidethe EEA is relatively small (totalling in 2011/12 perhaps 45,000 people including dependents 2).Although the characteristics of this group will clearly differ from those of the average migrant intothe UK in recent decades, the group also likely to be internally rather heterogeneous, partlybecause of the different eligibility criteria associated with different visa/routes. Eligibility for thesevisas depends mainly on the amount of capital brought in (for Tier 1) and employment category (forTier 2).The main determinants of demand for housing include household structure, age and income aswell as the relative prices of housing in different locations and the relative prices of housing andother goods. The usual expectation is that the income elasticity of demand is around unity whiledemand is relatively price inelastic. Tenure choice depends on the relative costs (includingtransaction costs) of different tenures including for example differential tax benefits and expectedprice changes and other constraints such as access to finance for owner-occupation andallocation rules in the context of social housing.

In this context Swiss citizens are treated as if they came from member countries of the EEA.

See section 6 - table 1.

Among the key characteristics of sub-groups of Tiers 1 and 2 which can be expected to be relevantto housing demand are:

age,

household/family structure,

expected income levels,

other factors that affect individual housing choice such as corporate remunerationpackages,

intentions/expectations with regard to duration of stay in the UK , and

costs of housing in relation to location of employment.

For the vast majority of Tiers 1 and 2 migrants and indeed for all migrants other than asylumseekers there is no access to social housing so the choice is between private renting and owneroccupation. How these factors play specifically in relation to the demand from Tiers 1 and 2migrants will depend heavily on how long they intend to stay. Those with short time horizons aremuch more likely to emphasise low transactions costs and easy access to housing. The demandfrom those with longer term horizons is likely to be far nearer that of similar indigenous households so will depend in addition on factors such as access to mortgage finance and the relative costs ofhomeownership and renting.Having established the likely pattern of demand from this set of migrants, the next stage of theanalysis involves examining the effect on house prices and rents and thence supply. There is verylittle reason to assume that the impact of migrants will be any different from that of generaldemand. So the scale of the effect depends on the extent to which demand increases and theshort- and longer-run elasticities of supply. Two important issues here relate to location? Domigrants want to live close to one another and so concentrate demand more than the indigenousdemand? And, particularly in the context of private renting, can increases in demand lead to thetransfer of stock between tenures so affecting the housing market more generally?.

3. Tiers 1 and 2 migration: the Points-Based System

Under the UKs current migration regime, employment-related migration from outside the EU isgoverned by the Points-Based System. Intending migrants must qualify for visas by achieving athreshold number of points based on their educational levels, salaries and professions; theparticular requirements vary by visa category. Annex A gives details of the current requirementsfor Tiers 1 and 2 visas. In general, Tiers 1 and 2 migrants may remain for an initial three years,then may be able to extend their stay for a further two.Tier 1 visas are intended for individuals with exceptional talent in a particular field, or for investorsor entrepreneurs. For 2011/12 there is a limit of 1000 exceptional talent Tier 1 visas (700 forscientists and 300 in the arts). There is no numerical limit on visas for Tier 1 investors, who musthave at least 1m in the UK. Similarly there is no limit on visas for Tier 1 entrepreneurs, who areexpected to invest in employment-generating businesses in the UK.There are three main types of Tier 2 visa available: shortage-occupation, resident labour markettest (RLMT), and intra-company transfer. To qualify for the shortage occupation route, theapplicant must have a certificate of sponsorship from a UK employer and be coming to do a job onthe official Shortage Occupation List. The minimum salary is 20,000. The RLMT category hasthe same minimum salary, but here the employee must be coming to do a job that is considered torequire skills of at least Level 4 of the National Qualifications Framework, and the employer mustbe able to demonstrate that they have not been able to recruit a UK resident for the position. Forthese two categories together (shortage occupation and RLMT) there is an overall limit of 20,700for migrants coming from abroad, but no limit on in-country applicants.The final category of Tier 2 migrant is Intra-Company Transfers (ICTs). There is no limit on thenumber of visas issued in this category. Applicants must have a Certificate of Sponsorship froman employer and be taking up a job that requires at least Level 4 of the National QualificationsFramework. Applicants with earnings of at least 40,000 (including some allowances) arepermitted to remain an initial three years, with a further two on extension; applicants who earnbetween 24,000 and 40,000 may stay a maximum of one year with no possibility of extension.Holders of all types of Tiers 1 and 2 visa are permitted to bring their spouses or civil partners, aswell as minor children. The dependants are granted the same leave to remain as the mainapplicants.The Points-Based System came into operation in 2008, and migrants who entered the countrybefore that arrived under rather different visa regimes. This is important because it means there isnot a long run of data relating to migrants who have arrived under the current system; to assesstheir likely long-term housing market behaviour we must look at migrants who arrived underprevious regimes.

4. Findings from existing research

The academic literatureThere has been growing academic attention paid to the interaction between migration and housingover the last 20 years. Before that, most of the work on the impact of migration focused on thelabour market or on issues associated with refugees and excluded groups. Even now, asWhitehead (2011) notes, Information about migrant housing circumstances in general (asopposed to particular problems such a street homelessness among migrants from the Europeanaccession [known as A8] countries) is relatively limited (Whitehead 2011 p.5). Much of theresearch done to date, including non-UK analyses, has looked at the impact of relatively largenumbers of migrants on the housing markets of entire nations or (more commonly) cities wheremigrants tend to clusteras it is well understood that (im)migrants are much more spatiallyconcentrated than natives (and) we can thus expect the effect of immigration to be stronger onspecific housing markets (Sainz 2006 p. 348).Sainz (2003), writing about the effect of the Mariel boatlift refugees on the Miami housing market,used statistical modelling to demonstrate that population increases due to migration create shortterm rent increases, particularly in those price and spatial sectors of the private rental marketwhere the migrant households cluster. The same author in 2006 looked at data for a number ofAmerican cities, and found that there is a local economic impact of immigration in American cities.Immigration pushes up the demand for housing in the destination areas. Rents increase in theshort term, and housing prices catch up (Sainz 2006 p. 363). The magnitude of the effect wassignificant: An immigration inflow that amounts to 1% of the initial metropolitan area population isassociated with, roughly, a 1% increase in rents and housing values (ibid. p. 364). This estimateis strikingly similar to that of the National Housing and Planning Advice Unit in the UK, who said inevidence to the House of Lords Select Committee that 2008 levels of net immigration, ifmaintained, would lead to additional house-price increases of 0.5 to 1% per annum (House ofLords 2008, paragraph 172, cited in Whitehead 2011). Ley and Tuchener (1999) show that thethree Canadian cities that attract most immigrants exhibited greater house-price rises than othercities in Canadaand more extreme falls when the market turned down.A rather different strand of the academic material relates to the household formation behaviour ofmigrants as compared to the indigenous UK population and the implications of observeddifferences for household projections and housing demand (Gordon et al, 2007; Holmans andWhitehead 2008; Whitehead 2011). This provides some, limited evidence on the short-run versusthe longer-term demand for housing by tenure and general migrant type.These papers were based on top-down analyses of large datasets. Another approach is toexamine the housing careers of migrant households. Most of the work done in this area focuseson low-income migrants, often refugees, and on what are called racialised minority populations(White 1998) or visible minorities (Carter 2005). Unsurprisingly, these studies indicate thatnewcomers (whatever their economic circumstances) are overwhelmingly accommodated in theprivate rented sector in the first instance; from there they may move on to owner-occupationeventually although some (deprived) groups are less likely to climb the housing ladder in this way.Whitehead (2011) and Gordon et all (2007) point out that in the UK, migrants from richer countriesare more likely to remain in the private rented sector than UK-born people, perhaps because theyalready own housing in their countries of origin. Khoo et al (2006) found that in Australia, 63% ofholders of temporary skilled migrant visas were in rental accommodation and 14% in owneroccupation.Migrants tend to live disproportionately in major cities, in the UK as in other countries. Accordingto Champion (2001), Increased immigration, whether resulting from growing labour marketdemands or as a result of the huge rise in asylum-seeking in the 1980s and 1990s, has not onlybeen focused on the largest urban regions of destination countries but has normally impacted5

most strongly on their more central residential areas (Champion 2001 p. 157, cited in Wulff 2005).Carter (2005) showed that the majority of immigrants to Canada went to the three largest cities.These cities had 29% of the countrys population, but 73% of immigrants who arrived since 1990had settled in them. Looking specifically at Tiers 1 and 2 migrants, MAC (2010) points out thatthey are more likely to live and work in London (p. 12).Social networks and the presence of existing migrant communities are important factors indetermining where migrants will settle. Murdie (2002) show that relatively well-off Poles reliedmore heavily on social networks in searching for their first residence on moving to Canada thandid more deprived Somalis. For Poles, the existence of local social networks was one of the threemost important criteria in the search for their first home, although in subsequent changes ofresidence the importance of this factor diminished. Aslund (2004) found that immigrants toSweden were attracted to regions where there were already many people from the individual'sbirth country and which had large overall immigrant populations.White (1998) finds that clustering can be identified not only for low-income migrants but also forthose from developed countries. He cites studies of the residential patterns of foreigner groups inBrussels and Vienna, which showed that segregation levels amongst the non-racialised groupsfrom nearby countries (such a Britain or Germany) were shown to be as high as amongst thosefrom, for example, Morocco or Turkey, but with very different residential areas being highlighted(White 1998 p. 1730). In Whites research into the residential patterns of developed-countrymigrants in London, he found that they tended to live in western areas of London in a distinctlyconcentric pattern focused around a clear area of high levels of representation (in an areastretching from the West End of London westwards past Hyde Park and Knightsbridge to reachEarls Court and Kensington), with generally decreasing representation with increasing distancefrom this concentration (ibid p. 1732)although he did not identify clusters of individualnationalities within this area. This analysis is based on data from the 1991 census and thepatterns will now be rather different, but clearly it is possible to identify areas of residentialconcentration of migrants from both more- and less-developed countries. In the case ofdeveloped-country migrants, White attributes these clusters not mainly to existing concentrationsof people from those countries, but to the availability of high-quality private-rented property andgood accessibility to employment. Brezzi et al (2010), who look at migrants location decisionsacross the OECD, found that highly skilled migrants may take their (housing location) decision notonly on the basis of job offers but also on the basis of the general attractiveness of the receivingregion (specific social services to migrants and their family housing, education; measures tobetter integrate spouses and children; climate) (Brezzi et al 2010, p. 2).A fascinating application of the bottom-up technique is found in White (2003), which describesresidential preferences and patterns of Japanese corporate transfers in Londonwho within thecurrent PBS would be Tier 2 migrants. White finds that the Japanese, most of whom areemployed in the City of London, tend to concentrate in certain neighbourhoods that are consideredsafe and have easy transport access to the City. Their employers often recommend they usecertain estate agents who specialize in the Japanese market, and their initial choices are thusconditioned to a great extent by what these agents offer. White found that there were landlordswho specialized in providing housing for Japanese expatsand that many of these landlords werethemselves immigrants, though not Japanese.Care must be used in applying the findings of the literature to the particular case of Tiers 1 and 2migrants in the UK. In the first place, many articles deal with the consequences of inflows ofmigrants that are relatively large compared to the existing population. But the numbers of Tiers 1and 2 migrants are small; even in the cities where they concentrate they will have much less of aneffect than flows of other types of migrant (in 2009 Tiers 1 and 2 migrants accounted for around10% of all non EU migrants and a much smaller proportion of all migrants). Second, most of thearticles deal with the effects of permanent migration, rather than the temporary migration that Tiers1 and 2 visas are meant to facilitate. In the short-run this distinction may matter little, since atemporary migrant occupies a dwelling just as much as a permanent migrant does, though6

temporary migrants are likely to have different tenure preferences from permanent migrants, andmay well employ different criteria in relation to other aspects of housing choices, including spaceand density.There is not much in the literature to guide us on this. But there are some likely associations withdiffering patterns of motivation among sets of economic migrants coming from different origins(including among EEA countries). In particular there is a basic distinction between those comingfrom origins where the real earnings expected for a given amount of human capital are well belowthat available in advanced economies, and those coming from origins where expectations aremuch more similar to those in the UK. In the former case migrants have a motive to come simplyto benefit from generally better economic opportunities, and to stay at least as long as thedifferential from their home country remains. In the latter case, migrants are more likely to beresponding to incentives associated with specific economic or training opportunities and social andcultural connections which themselves have a shifting relevance to their circumstances, whichmay also change. In this case, migration is much more likely to be temporary (whether for monthsor a decade or so). A clear distinction of this kind has been found in UK migration patterns fromanalysis of Labour Force Survey data (Gordon et al., 2007).In any case, a certain percentage of Tiers 1 and 2 migrants will end up staying permanently. Khooet al (2006) show that the desire of temporary skilled migrants to stay permanently in Australiagrew the longer they were in the country. Whitehead (2011) noted that economic migrants fromricher countries are more likely to return to their countries of origin than those from poorercountries. The figures suggest (see pp 21/22) that most Tiers 1 and 2 migrants come from poorercountries but to the extent that these are ICTs their potential for staying longer is almost certainlymore limited. Finally, much of the literature focuses on the residential choices and patterns ofdisadvantaged immigrant groups, including refugees, particularly their effects on local housingmarkets and neighbourhoods. Here there are issues around competition for adequate housingamong poorer households of all groups as well as potential discrimination (Robinson et al, 2007).This is very much different from the focus of the current project, which is looking at relatively welloff householdsthough this should not be overstressed, as the minimum income for Tier 2migrants is 20,000 per annum, which is well below UK median earnings of 26,000 in 2010.Grey literatureThe grey literature contains little that is relevant to this report. We thought we might find somesmall studies of the housing conditions or preferences of Tiers 1and 2-type migrants. But like theacademic literature, most of the non-academic ands small scale research on migrant housingfocuses on the housing conditions of low-income households. In the UK in the last few years thehousing of A8 migrants has been a particular issue, and many local authorities havecommissioned research in this area.One recent local authority report did contain information on Tiers 1 and 2-type migrants. TheLondon Borough of Wandsworth looked at all migrants use of private rented housing and foundthat recent EU migrants and asylum cases tended to live in sub-standard housing. In contrast,migrants entering through the points based system tended to live in better quality housing and hada good awareness of their rights (Bage, 2011, p. 2). The report noted that there was a cluster ofAntipodeans in Putney and South Africans in Earlsfield and Southfields, and said that existingsocial networks appeared to be a major factor in where migrants chose to live.There is also a body of material focusing on the residential preferences of wealthy foreigners.Savills, the London estate agency, publishes regular reports on this subject; the most recent(focusing on London) came out in June (Barnes 2011). The report contains data about the originsof buyers in Londons ultra-prime resale market. It notes that across prime London as a whole,27% of buyers over the past five years have been from overseas (ibid p. 4), and adds that thewealthiest people in the world are currently bringing around 3.3 billion a year into Londonseconomy by storing some of their wealth in its most expensive residential real estate (p. 5). The7

report focuses mainly on demand from wealthy buyers living overseas but notes that manyoverseas buyers who have invested over the decades have become permanent residents (p. 5).In terms of non-EU buyers, Barnes notes that Middle Eastern purchasers are particularlyconcentrated in prime central London, and are more likely to buy than to rent. Some 23% buyproperties worth over 5 million. Newly rich Chinese from the mainland, on the other hand, preferDocklands, where they bought 13% by value of all second-hand property in 2010. Indian andPakistani buyers are a significant force at the top end of the London property market, constituting9% of all prime central London buyers in the 5 million to 15 million price band (p. 10). NorthAmericans are more likely to rent than to buy. Most of these lettings are corporate, financed byUS banks, corporations and financial institutions for their key workers in London (p. 13). Thosewho do purchase tend to buy houses rather than flats.

5. Empirical methodologyQuantitative estimatesIn order to assess the actual and potential impacts of migrants on the housing market, ourmethodology included the following steps:1. Determining how many migrants are currently arriving in Tiers 1 and 2, and how long theystay;2. Characterising these migrants in terms of attributes relevant to housing demand, particularlyincomes, household composition and length of stay;3. Making some judgements about these migrants impacts on actual effective housing demandby tenure, scale and location;4. Assessing potential supply responses and market adjustments to such increments indemand; and5. Relating migrant demands to those of other residents, and identified (any) significant effectson their access to housing.Our approach started with estimates made on the basis of administrative data sources (mainly visaissuance records) of numbers of migrants, incomes, nationalities, and locations of employment.These administrative data do not contain information about household structures, residentiallocation or about housing generally. We therefore assembled a quasi Tier-2 dataset, using sixwaves of the Quarterly Labour Force Survey/Annual Population Survey, of people arriving in thecountry between 2003 and 2009 with characteristics similar to those of Tier 2 migrants in terms ofeducation, earnings levels, workplace regions and national origin. We then used this dataset toexamine the likely housing characteristics of Tier 2 migrants. This allowed us to make comparisonswith data from the English Housing Survey to assess the likely demand from different groups ofmigrants particularly distinguishing those who were in the UK for only a relatively short periodfrom those who could be expected to be longer term residents.Qualitative estimatesIn addition we carried out a programme of qualitative research including interviews with estateagents, relocation agents and major employers of ICTs to talk about migrants housing demand.We also carried out an online survey of estate agents in four areas where Tier 2 migrants weremost concentrated.We initially planned to carry out a web-based survey of estate agents in three geographical areas: London an area with a high concentration of IT firms, and one other area with high levels of Tiers 1 and 2 migration.9

Analysis of UKBA visa-issuance data (see tables 3 and 4) showed that, as expected, thesemigrants are concentrated both absolutely and in percentage terms in the south of England, andparticularly in London. However there are also concentrations in other areas, many associatedwith particular industries. So as not to limit the survey to southern England we widened our finalset of areas to four: London Reading (high concentration of IT firms) Ipswich (R&D) and Aberdeen (oil companies)We distributed a link to a web-based survey to about 100 members of the Association ofResidential Letting Agents to ask about highly-skilled migrants demand for housing (see Annex Bfor text). The surveys ask letting agents about their general experience with non-EU nationalsearning over 24,000 p.a. who are moving to the UK for work, as the agents are unlikely to beaware what type of visas their clients have, and therefore whether they are Tier 1 or 2 migrants.We created the survey in two versions, one for letting agents and one for sales agents, as ourpreliminary enquiries indicated that where estate agents deal with both markets, lettings and salesare usually handled by separate teams. While we expected that most skilled migrants would live inthe private rented sector, at least at first, the survey was intended to allow us to test thatassumption and how they moved on. We also wanted to explore whether certain types of migrantprefer to purchase. We compiled a list of e-mail addresses from among ARLA members in each ofthese four cities. The link to the online questionnaires was distributed by e-mail during the lastweek of July and re-sent as a reminder in the first week of September.The questionnaires covered the following topics: main nationalities of clients; numbers of such clients as a percentage of all clients, and changes over time; household type; type of housing required (location, price category, houses/flats) and whether this varies bynationality; whether certain nationalities cluster in particular neighbourhoods; normal length of stay (where renting); and any help with housing costs provided by employers.Having reviewed the responses to the questionnaire, we arranged interviews with estate agents,relocation agents and major employers of Tier 2 migrants. These allowed us to discuss theseissues in more depth, and to explore their views on the development of non-EU demand over thelast decade and how it affects rents, prices and supply.We interviewed representatives of three relocation agencies: one in London, one in Basingstokeand one in Aberdeen. Both the first two companies placed people across the UK but with amajority coming to London. The agency in Aberdeen deals only with Scotland and focuses mainlyon Aberdeen itself. Because the relocation agencies work for companies rather than for individuals,they proved to be a good way of finding out about housing for ICTs. These interviews focused on :10

Tier 2 migrants priorities in terms of housing, and how these vary by nationality/employmenttype/household type/location/income; the role of the relocation agencies in finding housing; particular issues that may affect some migrants demand for housing (e.g. requirements forchildrens education, tax considerations, employer requirements that they live close to work,a preference for living close to other migrants); the range of employer contributions to employee housing; and whether and under what circumstances clients choose to purchase rather than rent.It proved to be harder than expected to access people within companies of this type and oncecontacted they were generally reluctant to put people forward for interview. We conductedinterviews with representatives of two major employers that frequently carry out intra-companytransfers, an oil company and an IT consultancy, and one management consultancy. Both haveLondon offices but the oil company is a major presence in Aberdeen and the IT firm has its mainregional office in Reading. We also arranged for a third interview with a management consultancybut this was not possible to carry out as the interviewee was unwell.The interviews focused on the numbers of incoming ICTs each year and their distributionthroughout the year; the main nationalities of incoming ICTs; their main destinations within the UK,their expected length of stay; the balance between singles, couples and families; how and wheretheir workers are housed, any provision / requirements that the employers make for theiremployees and the use (if appropriate) of relocation agents.

11

6. Quantitative findings from administrative sources

Estimating numbers based on qualifications and household typesIn order to determine how migrants might affect housing demand and access, we need estimatesboth of the numbers of incoming migrants and their expected durations of stay. This allows us tocalculate how the accumulated stock of migrants would evolve. Table 1 presents estimates forexpected gross inflows of (long-term) migrants in 2011-12 associated with Tier 1 and Tier 2migration, based on: numbers of visas issued in 2010/2011 in the categories most closely corresponding to thecurrent Tiers 1 and 2, together with the numerical limits that have applied since April 2011 tosome subcategories; A MAC (2010) scaling factor estimate, representing the ratio of long-term (12 month +) nonEU migrant arrivals for work purposes (as recorded by the IPS) to visa issuances in the workrelated categories, for 2009; and estimates of associated dependent numbers, based on historic ratios for the relevant visatypes.Overall numbers of Tiers 1 and 2 migrantsOn the basis of existing migration figures we calculated how many migrants can be expected toenter the UK on Tier 1 and Tier 2 visas in 2011/12 i.e., expected gross migration. We cannotsimply extrapolate from 2010/11 figures as there were important rule changes that took effect inApril 2011. The following figures therefore are based on certain assumptions, which we have triedto make clear. Here we are concerned only with new entrants in 2011/12. There is of coursealready a stock of migrants who entered with Tiers 1 and 2 visas in previous years, some of whomwill have extended their visas for a further period, and some of whom can be expected to apply forpermanent leave to remain in due course. This is further discussed below. Annex A containsinformation about the requirements for each type of Tiers 1 and 2 visa.The expected number of entrants on main visas will be 53,320 (Table 1a). There will probably besome small number of visa recipients who do not actually use their visas, but because we have nobasis on which to estimate this number we will assume that 100% of visas are taken up. In relationto the proportion of people with issued visas who in fact become long-term migrants (that is, cometo the UK and stay for at least 12 months), we rely on MAC estimates of the observed ratio. MACsuggests that 68% of main visa applicants become long-term migrants (MAC 2010, Table B.3).Applying this figure to the 53,320 main visas issued gives a maximum of just over 30,000 main visarecipients who can be expected to stay for twelve months or more.Some of the main visa recipients will be accompanied by spouses and/or children, which will addanother 14,700 to the total number of long-term Tiers 1 and 2 entries in 2011/12 (Table 1b). Thescaling factors which MAC has used to convert total migration into long-term migration are differentfor main applicants and for dependants. Interestingly (and somewhat counter-intuitively), Table 1bsuggests that short-term migrants (those who stay for less than 12 months) are more likely to beaccompanied by dependants than those who stay for longer. This may indicate that short-termmigrants are generally more senior than long-term migrants, although we do not have anyconfirmatory evidence of this.We therefore expect that there will be a maximum of about 45,000 new entrants under Tiers 1 and2 this year (2011/12), including both main visa recipients and dependants. Table 1 shows ourcalculations. These are based on the numbers of visas issued in 2010/2011 in the categoriesmost closely corresponding to the current Tiers 1 and 2, on the numerical limits that have appliedsince April 2011 to some subcategories. In particular, they assume that the volume of ICTs will12

remain constant, and that the new quota of other Tier 2 migrants will be fully taken up. Wecalculated historic ratios of total household applicants to main applicants for each visa type andapplied them to expected numbers of main visas in 2011/2012 to come up with total expected visaissuances, then applied scaling factors (taken from MAC 2010, table B.3) to reduce this toexpected actual numbers of long-term immigrants.If the figure of 45,000 new arrivals in 2011/12 is accurate, and if long-term immigration to the UKremains at the levels seen in previous years, migration from Tiers 1 and 2 migrants wouldrepresent about 7.7% of total inflows, including EU migrants. However the governments policy isto reduce net migration substantially, implying a reduction in immigration. If this reduction occurs,and numbers of Tiers 1 and 2 migrants are not also further reduced, then they would account formore than 7.7% of total inflows. The actual percentage will depend on the scale of the drop andany further changes that might take place in Tiers 1 and 2 limits.This analysis provides a projection of the potential importance of Tiers 1 and 2 immigration in thefuture. Looking at statistics for previous years, the Migration Advisory Committee estimated that in2009 Tiers 1 and 2 migrants accounted for about 10% of non-EU migrants (MAC 2010 p. 130).These estimates all relate to gross inflows, since it is these which are the direct subject of controls,though their objectives are framed in relation to net migration targets. To assess housing impactsbeyond the short-term, we need to understand the likely evolution of outmigration flows byparticular cohorts of Tier 1 and Tier 2 in-migrants as well ideally as how they move within the UK.These will clearly be influenced by the way in which visa controls are enforced, and how durationsof stay are managed in practice. Here we are dependent on guidance from official sources. Butmigrant flows are also likely to depend substantially on characteristics of the migrants themselves,their intentions and the roles they come to play in the economy.

BCDELimit from Main visasMain visas to be issued 2011/12Entrants on main visas 2011/12 who stay for at2011issued 2010/11(from columns B and c)least 12 months (scaling factor: 0.58)1,000*1,000580None205205119None24524514220,700

20,700

12,006

Say 1,000

580

8,735NoneNone29,170

29,170

38,355

52,320

16,918

None30,346

Source: LSE London calculations based on Control of Immigration Statistics for year ending March 2011 and ONS provisional estimates of Long-Term International Migration for year endingSeptember 2010. Scaling factor taken from MAC 2010, Table B.3

Source: LSE London calculations based on Control of Immigration Statistics for year ending March 2011 and ONS provisional estimates of Long-Term International Migration for year endingSeptember 2010. Scaling factor taken from MAC 2010, Table B

15

Length of stayThe scaling factors in the final columns of Tables 1a and 1b (.58 and .39) could differfrom the expected value of 1 for one of two reasons: individuals who receive Tiers 1 or 2 visas do not actually move to the UK;and/or some migrants with Tiers 1 or 2 visas stay for less than one year, and thereforeare not recorded as migrants in the immigration statistics because theexpected duration of stay is less than 12 months.Examination of published estimates from ONS of short-term migration flows for 200409 (Whitworth et al, 2011), and data on used Certificates of Sponsorshipdemonstrate that virtually all visas get converted into worker flows, but for a range ofdifferent durations. Only some of these flows will be counted as involving (long term)migration, with the residue being likely to fall very largely in the short-term migrationcategory. Some other types of employment-related visa (in Tier 5 specifically) maybe associated largely with very brief stays that fall below the minimum durationthreshold to count as even short-term migration (as distinct from simply workingvisits). Thus there is a substantial group of migrants entering on Tiers 1 and 2 visaswho stay for less than one year, including a disproportionately large share of thedependants (roughly 1.0 per main entrant, as compared with 0.5 for the actualmigrants).For housing purposes it is particularly important to know the distribution of length ofstay for those who do spend at least one year in the UK. There are two sources ofinformation:1. examination of the distribution of visa types in relation to their legal duration,and evidence on extensions and applications for long-term settlement;2. using information from the Annual Population Survey for a series of years (seebelow) to estimate the probability that migrants with similar characteristicsremain in the country for particular numbers of years. This source does not(try to) cover people who have been in the country for less than 6 months: itwould thus be expected (from the Whitworth et al evidence) to exclude 90% ofthe short-term employment migrants, as well as all those falling below itsminimum stay threshold, and to be comprised almost entirely of long-termmigrants.In terms of evidence from administrative sources, all Tiers 1 and 2 visa holdersexcept ICTs are permitted to apply for indefinite leave to remain after five years in theUK3. Home Office research (Achato et al 2010) showed that about 29% of those whowere issued with employment-related visas in 2004 had achieved permanentsettlement in the UK after five years. The research suggested that most applied forsettlement as soon as they reached the five-year qualifying period. A further 11%were still in the country. Some of these could be expected to apply for permanentsettlement at some point, although the proportion would probably be small as theywere already able to apply but had not done so. From these sources, it therefore3

The Government has recently consulted (and commissioned work to the MAC) on this issue with aview to potentially changing rights to employment-related settlement.

16

seems reasonable, based on past behaviour, to assume that about 30% of non-ICTTiers 1 and 2 visa recipients will remain permanently in the UK. We expect about45,000 total migrants to enter under Tiers 1 and 2 in 2011/12. Since these are bydefinition people remaining in the country for a year at least, the level of net migrationassociated with this flow would also be 45,000 (100%) at the end of this year. By 5years later it would be expected to have fallen to some 36,000, and by (say) 10 yearsfrom first entry to something like 27,000. In the next few years, of course, theobserved level of net migration by (otherwise similar) non-economic migrants fromoutside the EEA should be significantly lower than this implies, because a proportionof those who entered previously (in rather larger numbers, under a looser migrationregime) could also be expected to leave.IncomesMinimum income requirements apply to most holders of Tiers 1 and 2 visas. Theseminima vary by visa type. MAC (2010) contains information on actual entry salariesfrom UK Border Agency Management Information Data. These are summarized inTable 2.The median entry salaries for Tier 2 migrants were fairly low, and in fact the medianincome for ICTs in 2009/10 of 40,000 is now the minimum for such migrants.However the mean income for Tier 2 migrants in 2009/10 was much higher, at56,830, indicating that some Tier 2 migrants received high salaries (MAC 2010, p.96). A breakdown of median salaries for Tier 2 jobs by 2-digit Standard OccupationalCode 2000 classification showed that ICT migrants were always paid higher salariesthan other Tier 2 migrants in the same occupational category (MAC 2010 p. 97).Under the current system the minimum salary for Tier 2 migrants is 20,000, but in2009/10 there were some occupations where Tier 2 migrants on average earned lessthan 20,000, including Textiles, Printing and Other Skilled Trades; Caring PersonalService Occupations; and Elementary Trades, Plant and Storage-RelatedOccupations. The report does not indicate the numbers of migrants in these low-paidcategories.

earnings projected by employers for Tier 2 migrants are reasonably high as wouldbe expected though there is quite a lot of variability. The pattern of earnings (andearnings plus allowances) differentials shows significant differences related tonationalities of origin, Tier 2 routes (ICTs, shortage occupations and RLMT cases),and whether the applicant was in or out of the country when applying. In particular,after controlling for occupational differentials, people from rich countries and thosecoming through ICTs tend to earn more. But the effect is largely concentratedamong people from rich countries coming through ICTs suggesting that ICTs areused in different ways for the two groups (with cheapness of labour perhaps beingmore critical in one case and personal indispensability in another).Locations of employmentAnalysis of UK Border Agency Management Information Data on Certificates ofSponsorship for Tier 2 migrants shows that the employers are spatially concentrated.We can therefore assume that employee workplacesand by extensionresidencesare also concentrated. This appears to be supported by our qualitativeresearch. At district level, as Table 3 shows, 9 of the top 25 local-authority areas interms of the numbers of recent Tier 2 migrants employed there are London boroughs,including a cluster of 6 in the centre which together account for more than a third ofthe national inflow. This degree of concentration, as perhaps might be expected, israther higher than for most employment- related migration (where the share ofLondon as a whole has been about 30%, except in the case of A8 migrants, where itis substantially lower). The greatest concentration is in the City and its eastwardextension in Canary Wharf (within Tower Hamlets LB), where the inflow over the 2.5years covered by the data source was equivalent to over 3% of total localemployment 10 times the average across the UK as a whole. By contrast, althoughManchester, Birmingham/Solihull, Leeds and Edinburgh also enter the top 10 listing,it is notable that these other major cities together account for less than a quarter ofthe number of Tier 2 migrants compared with the 6 boroughs in the centre of London.18

Top 25 districts and London boroughsDistrictNumber% ofAs % of local(000s)nationaljobstotal1.City of London11.212.1%3.1%2.Tower Hamlets LB7.68.2%3.5%3.Westminster LB6.46.9%1.0%4.Southwark LB2.83.0%1.2%5.Camden LB2.02.2%0.7%6.Hillingdon LB1.92.1%1.0%7.Islington LB1.92.0%0.9%8.Edinburgh1.61.7%0.5%9.Suffolk Coastal1.51.6%2.5%10.Milton Keynes1.41.5%0.9%11.Leeds1.31.4%0.3%12.Reading1.21.3%1.2%13.Hounslow LB1.11.2%0.8%14.Birmingham1.11.2%0.2%15.Manchester1.11.2%0.3%16.Lambeth1.11.2%0.7%17.Aberdeen City1.01.1%0.5%18.Swindon0.80.9%0.7%19.Runnymede0.80.9%1.4%20.Macclesfield0.80.9%0.9%21.South Gloucestershire0.80.9%0.5%22.Ealing LB0.80.9%0.6%23.Solihull0.80.8%0.8%24.Cambridge0.70.8%0.8%25.Wokingham0.70.8%1.0%Note: Data relate to the location of the sponsoring employer for all used CoS in the period December2008-May 2011 (30 months).Source: LSE London analysis of UK Border Agency Management Information Data on

Certificates of Sponsorship

This very high degree of migrant concentration reflects the high representation withinthese particular localities of the types of key and/or shortage jobs eligible under thePBS to be filled by Tier 2 workers from outside the EEA. However, as in the centralLondon case, particularly, it is clear that workers can commute into these workplacesfrom other areas that may not be very close by. Hence the housing market impactsmay be much more widely diffused and proportionately less significant in theirimpacts on local demand.A more relevant spatial basis on which to assess such potential impacts is the Travelto Work Area, which provides a reasonable operational approximation to effectivelocal housing market areas, as well as to the local labour market areas they are19

intended to represent4. This is the spatial level on which we shall primarily focus inour analyses. Table 4 provides another league table of the areas of principalconcentration in TTWA terms with the ordering in this case based on the ratio ofTier 2 migrants to total local jobs (rather than sheer numbers). Unsurprisingly, atthis geographic scale, the top values for this ratio are much lower than observed inthe central London boroughs, with a ceiling of just below 1%. This is equivalent inannualised terms to the addition of a maximum of 0.4% to the local workforce andpotentially to housing demand, though in particular segments of the housing markettheir significance could still be a lot greater.Table 4: Certificates of sponsorship issued 2009-2011 by location of sponsor:Travel to Work Areas of main concentrationTTWANumberAs % ofAs % of(0000s)national totalemploymentin areaLondon43.446.9%0.8%Reading & Bracknell2.93.1%0.9%Guildford & Aldershot2.12.3%0.5%Ipswich1.71.9%0.9%Milton Keynes & Aylesbury1.81.9%0.7%Edinburgh1.61.8%0.4%Wycombe & Slough1.41.5%0.5%Swindon1.21.3%0.5%Crawley1.21.3%0.4%Aberdeen1.11.2%0.4%Luton & Watford1.11.2%0.3%Cambridge1.01.1%0.4%Stevenage0.80.9%0.4%Norwich0.90.9%0.4%Bournemouth0.60.7%0.4%Basingstoke0.50.6%0.6%Newbury0.40.4%0.5%Calderdale0.30.3%0.3%Whitehaven0.10.1%0.4%St Andrews & Cupar0.10.1%0.4%Pembroke & Tenby0.10.1%0.3%Unassigned0.20.2%..Other identified areas28.030.3%0.1%Note: Data relate to the location of the sponsoring employer for all used CoS in the period December2008-May 2011 (30 months).

In TTWA terms, the geography of concentration of Tier 2 migrants is more obviously

regional in scale, with the areas of greatest relative density being found very largelywithin the area identified by Peter Hall (1987) as the Greater South East, bounded bya line linking Cambridge, Milton Keynes, Swindon and Bournemouth though as inmaps of economic dynamism and labour market tightness, it is London and the4

Though in both cases, it needs to be understood that such market areas are well short of 100%closure, with a significant share of impacts being likely to spill over into nearby TTWAs, especiallywhere there are tight supply constraints in the main area.

20

western crescent which are strongly represented, rather than Kent, Essex or EastSussex. Ipswich is a striking outlier from this concentration, matchingReading/Bracknell at the top of this table, because of what appears an R&D offshootfrom the Cambridge cluster.Outside this core region, the only two TTWAs that are significant both numericallyand in terms of the Tier 2 jobs ratio are Edinburgh and Aberdeen. This seems toreflect their distinctive (international) roles within financial services and the oilindustry, respectively. Simple statistical analyses suggest, however, that the broadpattern of concentration (relative to employment) is related primarily to the proportionof local jobs in IT and financial services, and secondarily to the overall level ofemployment in the TTWA (proxying its importance and the likely status and marketareas of activities based there5).GenderThe gender mix of Tier 2 (main) migrants is skewed towards males and much moreso among Indian nationals than for those coming from elsewhere (81% against63%)6. In age terms, they are relatively young, as expected of international migrants,with strong concentration in the 25-34 age range. This is particularly marked for Tier2 migrants from India, 76% of whom were in this age group (among arrivals in thelast year), while other countries included more sizable minorities in the middle ageranges, most notably among those coming from rich countries.NationalityWithin the Tier 2 category, it is Indians who stand out as much the largest nationalgroup, accounting for 55% of the total, followed by US citizens with 13% and thenAustralians, Canadians, Chinese, Filipinos, Pakistanis and South Africans with 2-3%each. The position of Indians is potentially distinctive, not only because of thegender mix but also because they are especially concentrated in two of the ICT subtiers (where they account for around 75% of cases), rather than the General Migrantcategory and may therefore generate different housing market dynamics. Giventhe evidence of important differences between the positions of migrants from richerand poorer nations, we thus chose to work with three basic nationality groups: Indians, nationals of other poor countries and nationals of richer countries (US, New Commonwealth, Japan and Korea).

This is not simply a London effect since London is by no means an outlier in terms of its overall Tier2: jobs ratio and the best fitting (positive) relationship is actually with the square root of total TTWAjobs.6

This seems to partly attributable to the strong male (as well as Indian) preponderance among ICTs.

21

ConclusionsThese data suggest some starting points for assessing the potential impacts of Tiers1 and 2 migrants on housing demand and the housing market: first, the overall estimate of 45,000 migrants in 2011 includes just 30,000 mainmigrants (as distinct from dependants), representing a maximum possiblenumber of additional households; second, these migrants tend not only to be relatively young, but also mostlyeither single or unaccompanied (since on average they are associated withonly 0.5 dependants). Thus third, many might be expected to share accommodation, at least initially;. fourth, the majority come from India and are concentrated in two ICT sub-tierswith potentially distinctive housing demand characteristics (including shortdurations of stay); and perhaps most importantly in terms of their aggregate impact on local housingmarkets, arrivals over the past 2.5 years make up no more than 1% ofemployment in any TTW area, and their concentration is below 0.5% in all butfour: London, Reading, Ipswich and Milton Keynes. At the other extreme,nearly 30% of arrivals are spread very thinly across the country.

22

7. Quantitative findings from the Annual Population

SurveyThe administrative sources discussed above give us a picture of the migrants as theyarrive in the UK but do not provide much information on the way their householdsand housing consumption develop subsequently. We therefore constructed adataset of households with characteristics similar to those of Tier 2 migrants in termsof various indicators, and used this dataset to examine the likely housingcharacteristics of Tier 2 migrants. The information available from this source is verymuch fuller for workers in Tier 2 than for those in Tier 1. Tier 2 is expected to be thesource of a very much larger number of migrants (by a factor of about 30 on thefigures presented in Table 1). It should be noted, thought, that because Tier 1 islikely to include a much larger share of very high earners / high wealth individuals,they may still have a disproportionate impact on the housing market.The overall database amalgamates six calendar years of the Annual PopulationSurvey (APS) 2004-09. Combining years provides a more robust sample of migrantgroups who account for only small proportions of the population. This will clearlyinclude people who came in under different migration policy regimes, though it doesnot include the years of peak asylum-seeker arrivals around the year 2000. In totalthe database includes some 2.4 million individual cases, though with an element ofduplication7 from respondents surveyed in successive years: the actual number ofdistinct individuals covered is 1.7 million.Tiers 1 and 2 migrants are obviously notthe PBS was not in full operation beforeadministrative statuses are not recordeddata (from MAC / UKBA) on a numberissued under PBS tiers, specifically:

identifiable from this source, both because

the last year which it covers and becausein the APS. We do, however, now haveof key characteristics of those with visas

occupations and salaries for RLMT, shortage occupation and ICT cases (Tier2), workplace postcodes by dates of CoS (Tier 2 and work permits), age group * sex * nationality for sub-Tiers (Tier 1), age group * sex * nationality (Tier 2), nationality by sub-tier (Tier 2), and Long Term Residence Grants (Tier 1 sub-tiers and Tier 2) with prospectiveearnings/qualifications (Tier 2).We used these data to identify from the 2006-09 APS file a sub-sample of migrantswith similar characteristics (including household structure) to those of Tier 2 migrantsin terms of: age, sex and nationality;7

And occasional triplication.

23

workplace location; and

occupation / earnings.For the duration-of-residence estimates it is important to use characteristics whichare effectively fixed, in order to compare shifting counts of the numbers reported asarriving in a particular period. This rules out the use of either current residence orearnings. We therefore restricted the APS sample to those who could be reasonablyexpected to have completed their education prior to arrival in the UK, and use aqualification cut-off (those educated to degree level) in place of earnings.In analysing the household characteristics we treated those receiving Tier 2 visas asthe main migrants, excluding the dependants who may have arrived at the same timeor subsequently. We used the characteristics of these main migrants (including theirearnings levels) as determinants of household structurethat is, we did not start withindependent estimates of dependency rates, and then attempt to imputecharacteristics of a mixed group of main migrants plus dependants.Head-of-household statusIn order to match data from the APS with English Housing Survey information weneed to clarify the role of migrants in the household and thus the types ofhousehold in which they live. Tables 5 and 6 show that overall, 71% of Tier 2-typemigrants are household representatives. Those from India are most likely to behousehold representatives, while those from rich countries are somewhat less likelyto have this status. Those who are household representatives are either single orhave their own families. Those who are not may be living in multi-adult householdsor within another household in either case they do not generate demand foradditional units.Table 5: Tier 2-type migrants: Household status by country-of-origin group (%)Country-of-origin groupsRich nonPoor non-EEA excludingHousehold statusEEAIndiaIndiaTotalHousehold representative66766871Not household34243128representative100 100100100TotalSource: LSE London analysis of APS data. Percentages may not sum to 100 because of rounding.

The percentage of Tier 2-type migrants who are household representatives falls thelonger the migrants have been in the UK (Table 6). Some 76% of Tier 2-typemigrants are household representatives on arrival in the UK, but after six years theproportion falls to 53%. This is a quite surprising finding given the gender and ageof the migrants but is most easily explained by household fusion, fission andpartnering resulting in new household types

24

Table 6: Tier 2-type migrants: Household status by time in UK by (%)

Years since arrival in UK012345TotalStatus in householdHousehold76737571716671representativeNot household24262529293428representativeTotal 100100100100100100100Source: LSE London analysis of APS data. Percentages may not sum to 100 because of rounding.

Household typeAbout 64% of the English population overall lives in single-person or couplehouseholds but for Tier 2-type migrants the proportion is less than 50% (Table 7).Overall about 14% of Tier 2-type migrant households are single people, but formigrants from poor countries (excluding India) the proportion is 20%--still well belowthe figure of 29% for all English households. A further 32% of all Tier 2-type migranthouseholds are couples (vs 35% of all English households). While migrants frompoor countries are more likely to live alone, migrants from rich countries arecomparatively more likely to live in couples.Some 36% of Tier 2-type migrant households consist of one or two parents and atleast one child8, as compared to 29% for all English households. This reflects the ageat which migrants come into the country and their consequent patterns of familyformation.In addition to these family households there are sizeable proportions of couple/familyand other adults and other multi-adult householdswhich together account for 17%of Tier 2-type migrant households. This is more than twice the proportion of suchhouseholds in the English population as a whole. Such households include bothmulti-generational households and unrelated sharers; we would expect the latter typeto be fairly prevalent among Tier 2-type migrants. This is a very usual way ofaddressing the housing decision at entry especially among those who do not want tospend too much of their income on housing and who expect to return home in therelatively near future. If they remain in the UK the expectation is that these types ofhousehold would eventually re-form as separate households.Tier 2-type migrants will therefore generate demand for a range of housing types,from small flats suitable for single people or couples to accommodation that enablessharing and large family houses. Compared to the overall population, however, Tier2-type migrants tend to live in larger households (some of which are made up ofsingle sharers and may live at much higher densities than average). Migrants fromricher countries can be expected to generate somewhat more demand for smallerunits, and migrants from poorer countries for larger unitsbut the differences aresmall.

Some of these will be two-person householdsone parent, one childbut we have includedthem in the large household category in order to limit the number of categories for analysis.Households made up of one parent and one child accounted for 7% of English households in2008, according to the LFS.

25

Table 7: Household type by country-of-origin group (%):

Tier 2-type migrant households:Country-of-origin groupsPoor nonRichEEAOverallnonexcludingEnglandHousehold typeEEAIndiaIndiaTotal (2008)Single person1312201429Couple only3833253235TOTAL SMALL HOUSEHOLDS 5145454664Parent(s) and children alone2837413629Couple/family and other adults75668Other multi-adult household1512711TOTAL LARGE HOUSEHOLDS 5054545337Total100100100100100Source: LSE London analysis of APS data, DCLG Live Table S108: Household type by tenure, England2008. Totals may not add due to rounding.

Migrants who work in Londons financial centre are more likely to live in smallhouseholds than those working elsewhere in the UK (Table 8). However it is difficultto say precisely what this might mean for housing demand in surrounding areas asthe radius of commuting around the City of London is so large. Migrants working inthe City can be expected to live not just in neighbouring areas but throughout greaterLondon and across the Southeast. Having said that, there is a large concentration ofhigh rise blocks of flats in nearby Canary Wharf, many of whose units are privatelyrented. These would provide good accessibility for small and even sharing migranthouseholds relocating to work in the City.Table 8: Household type by location of workplace (%):Tier 2-type migrant households:Location of workplaceCity /Rest ofRest ofRestTowerGreaterGreaterofHousehold typeHamlets London South EastUKTotalSingle person1713131414Couple only4135272832TOTAL SMALL HOUSEHOLDS 5848404246Parent(s) and children only2233424336Couple/family and other adults88456Other multi-adult household1210141011TOTAL LARGE HOUSEHOLDS 4251605853Total100100100100100Source: LSE London analysis of APS data. Percentages may not sum to 100 because of rounding.

Housing tenureAbout three-quarters of Tier-2 type migrant households live in the private rentedsector, and about one-fifth own their own homes (Table 9). Compared to thepopulation as a whole, Tier 2-type migrant households are five times more likely to26

live in private rented housing while their propensity to be home owners is less than athird that for the general population (Table 9, last two columns).The table also indicates that about 3% of Tier 2-type migrant households live insocial housing. This table presents data about people who share characteristics withTier 2 migrantsnot actual Tier 2 migrants. We would not expect to find any actualTier 2 migrants living in social housing unless they formed a household unit with aneligible resident or until they themselves qualified for welfare benefits which wouldentail change of visa status.Table 9: Housing tenure by country-of-origin groups (%):Tier 2-type migrant householdsCountry-of-origin groupsRichnonPoor non-EEAHousing tenureEEAIndiaexcluding IndiaTotalOwner occupier17182820Social renting1443Employer housing3645Other private renting77716370Living with relative or3111rent freeTotal100 100100100

OverallEngland(2008)681814100

Source: LSE analysis of APS data, DCLG Live Table S103, Household Type by Tenure, England 2008.Totals may not add due to rounding.

Over time this picture changes. The longer Tier 2-type migrant households stay in theUK the more likely they are to become homeowners (Table 10). After six years theirowner-occupation rate is still much lower than average but has risen to 45%, ascompared to the 68% figure for the English population as a whole. Earlier evidencesuggests that it takes about 10 years before a migrant household would near thenational average given household structure (Whitehead, 2011).Table 10: Housing tenure by number of years since arrival in UK (%):Tier 2 type migrant households:Years since arrival in UK0123456TotalHousing tenureOwner occupier48142529424520Social renting12553554Employer housing26535605Other private renting8682756761465070Living with relative or62102102rent freeTotal 100 100 100 100 100 100 100100

OverallEngland(2008)681814100

Source: LSE London analysis of APS data, DCLG Live Table S103, Household Type by Tenure,England 2008. Totals may not add due to rounding.

Not surprisingly, Tier 2-type migrants working in the City are most likely to live inprivate rented accommodation and least likely to own their homes, while thoseworking outside the greater South East are most likely to be homeowners (Table 11).Some 16% of Tier 2-type households with employment in the City are owner27

occupiers as against 25% for those working outside the Greater Southeast. Therelativities are similar for the population at large although the proportions are quitedifferent: according to LFS data from 2008 some 55% of all London householdsowned their own homes, as compared to about 70% in the rest of England.Table 11: Housing tenure by location of migrants workplaces (%)Tier 2-type migrant households:Location of workplaceRest ofRest ofCity / TowerGreaterGreater South RestHousing tenureHamletsLondonEastof UK TotalOwner occupier1622172520Social renting13453Employer housing0.525105Other private renting8071735970Living with relative or22112rent freeTotal100100100100100Source: LSE London analysis of APS data. Percentages may not sum to 100 because of rounding.

Using the English Housing Survey to compare behaviour

A rather different approach to estimating the impact of migration on demand forhousing is to clarify the main factors affecting demand among the general population,and then to compare the migrant population to that pattern. In so doing we noteagain that in the short run after immigration, migrant households are very heavilyconcentrated in the private rented sector and often consume far lower levels ofhousing than their indigenous counterparts, even in the owner-occupied sector.However over time the migrants who remain, and who tend to from poorer countries,will start to look more like their indigenous counterparts. Those who stay 10 years ormore (whom we estimate on past trends to be around 60% of the total) will consumemuch the same housing as those who have lived here all their lives.One obvious aspect of the UK housing system is that consumption of housing ishighly correlated with owner occupation. So as migrants settle in the country andtheir incomes increase they tend to move into that tenure. In this context it is worthexploring how the major differences between migrants and the population as a wholeimpact on the expected level of owner-occupation.Table 12 uses a logit model to clarify the extent to which the attributes of householdsin owner-occupation differ in terms of household attributes from those who are not.This measures propensities against an identified base case. It shows therefore thatyounger households (and the majority of migrants are initially under 35) have farlower propensities to be owners than older households, but that even people in thisage group clearly move in order to own.Similarly, ownership is much lower among single and multi-adult households thanamong couples and those with children. So migrants, who disproportionately starttheir housing careers in the UK with no, or mainly adult, dependants, are again lesslikely to own. On the other hand, those who are skilled workers orprofessionals/managers are far more likely to own than average and Tiers 1 and 2workers fit these categories. This suggests that as they normalise their ownershiprates can be expected to become higher than the general average.28

This analysis shows that while some attributes of Tiers 1 and 2 migrant householdssuggest that they will have far lower than average levels of owner-occupation (and byimplication consume less housing overall), the particularly low levels of owneroccupation seen on entry are specifically about migration itself. As people settle theybecome more like their indigenous counterparts -- but many do not settle and arereplaced by others with similar attributes. This appears to be particularly the case forICTs, especially those from India, where the qualitative analysis suggests theychoose to spend relatively little on housing.Those migrants who do remain are likely to demand housing in a very similar fashionto their indigenous counterparts. On the estimates above, this would suggest thatsome 25,000 of the households entering in any given year will within a decadedemand similar housing to those with similar incomes and housing attributes. Thefollowing tables from the English Housing Survey help to clarify the nature of thatdemand.Tables 13 - 17 present data on the housing of English households with incomes ofover 20,000 that are headed by skilled workers. We will call these households thecomparator group. These filters were chosen because the lower salary limit for Tier2 shortage occupation entries is 20,000, and all workers in Tiers 1 and 2 are skilled.Thus these tables allow us to examine how English households of similar skills andincomes to the Tiers 1 and 2 migrants are accommodated.Table 13 clarifies the extent to which Tier 2-type migrants are atypical initially interms of their preparedness to be owner-occupiers as compared to similarhouseholds already in England. Of all comparator group households, 88% own theirown homes and 9% are private renters. Among Tier 2-type migrants, however, 75%are private tenants and only 20% are owner-occupiers. The proportion in owner29

occupation is highest at 28% among Tier 2-type migrants from poor countries otherthan India and lowest among migrants from rich countries. Some three-quarters ofmigrants from all countries of origin live in the private rented sector as compared toonly 9% of similar households in England.Table 13. Housing tenure: Tier 2-type migrants vs all skilled-workerhouseholds with incomes over 20,000 (%)All householdsTier 2-type migrant householdsAll skilled-workerhouseholds inMigrantsMigrants fromMigrantsAll Tier-2England withfrom richpoor non-EEAfromtypeincomes overHousing non-EEAcountriesIndiamigrants20,000tenurecountriesexcluding IndiaOwneroccupier1718282088Privatetenants807767759Socialrenting14433Livingwithfriends/family31111Source: LSE London analysis of LFS and EHS data

Similarly, Tables 14 and 15 show that regardless of household type or age,

comparator group households are overwhelmingly likely to own their own homes.About 90% of couples and families in this category are home owners, but so are 81%of single people. Only for multi-adult households (initially particularly relevant formigrant groups) is the proportion considerably lower, at 66%. These are the types ofhousehold most likely to live in private rented housing (29%).Table 14. Household type by housing tenure:all skilled-worker English households with incomes over 20,000 (%)Housing tenureOwnerPrivateSocialLiving withHousehold typeoccupiertenantstenants friends/familySingle person811441Couple alone89921Parents and children alone89740Couple/family and other adults93331Multi-adult662923All such households88931Source: LSE London analysis of EHS data

Table 15 shows that even among the youngest comparator-group households

those headed by people 25 years old or youngerover half are owner occupiers.The proportion of owner-occupiers goes up steadily with age and over 3 in 4 of thenext group of between 25 and 34 already own this is the most important groupamong migrants. The youngest group is the most likely to live in private rentedaccommodation, and the likelihood of living in this tenure declines steadily with age.

30

Table 15. Age group by housing tenure:

all skilled-worker English households with incomes over 20,000 (%)Housing tenureAge of head ofhousehold25 and under26-3536-4546-5556-6566+All such households

Owneroccupier55778892949488

Privatetenants361895429

Social tenants6433233

Living withfriends/family4100011

Source: LSE London analysis of EHS data

Table 16 clarifies that most comparator-group households live in houses rather thanflats, with only 10% of this group living in a flat, maisonette or other type of dwelling.This is true even among single people, among whom 70% live in houses. Largerfamilies (parents with children or couples and families with other adults) are the mostlikely to live in detached houses.Table 16. Accommodation type by household type:all skilled-worker English households with incomes over 20,000 (%)Accommodation typeDetachedSemi-detached or Flat/maisonette/Household typehouseterraced houseotherSingle person205029Couple alone414910Parents and children alone37594Couple/family and other adults42552Multi-adult165724All such households365310Source: LSE London analysis of EHS data

Finally, table 17 shows that about 70% of comparator-group households of all ageshave two or three bedrooms. This percentage is remarkably consistent across agegroups suggesting that there is not much of an age ladder in terms of space. Ofthose under 25, 72% live in dwellings with one or two bedrooms, while for those 5665 the percentage is the same.

31

Table 17. Number of bedrooms by age group:

all skilled-worker English households with incomes over 20,000 (%)Number of bedroomsAge of head of household1234+25 and under11225026-359264636-459264546-559254556-659264666+72446All such households92645

17202020192320

Source: LSE London analysis of EHS data

The most important implications of these findings are that:

Initially migrant households do add to demand simply by adding to the numberof households (with over three quarters becoming household living in separateaccommodation); however they tend to live in private rented accommodation and to consumevery much less housing than equivalent resident households this isparticularly true for the one in six migrant multi-adult households, most of whomwill be located in the private rented sector. The qualitative data suggests thatmany of the Indian ICTs will be among this group; as migrant households become more settled they not only change the nature oftheir households partnering with residents or other migrants, bringing independants or breaking up sharing arrangements but they also start toincrease their housing consumption and become owners; this process starts quite quickly but it still takes over a decade before migrantsconsume similar levels and types of housing to the indigenous population.Thus the impact of immigration on demand depends very heavily on turnover amongmigrants. If people stay relatively short periods they will mainly consume lesshousing than their indigenous counterparts and will remain disproportionately in theprivate rented sector. If they stay they will become owner-occupiers, living in higherquality housing within reach of their work, probably mainly in the suburbs of Londonand the Greater South East.A final question with respect to demand is the scale of the impact of Tiers 1 and 2migrants on the market. Clearly migrants impact immediately on demand andcompete with other mobile households. Table 18 gives a rough estimate of thepercentage of mover households in London and the rest of England that are Tiers 1and 2 migrants. The total projected number of main out-of-country Tiers 1 and 2visas in 2011/12 is 30,346 (Table 1). We treat this as the expected annual numberof Tiers 1 and 2 migrant householdsassuming that each visa accounts for onehousehold. This might in fact be a slight overcount, as a few households maycontain more than one individual with a Tier 1 or 2 visa. This figure applies to the UK.Within that number there are two large concentrations outside England in Edinburghand Aberdeen accounting for some 1,700 Tier 2 migrants. We therefore assume thatroughly 2,000 Tier 2 migrants go to locations outside England. These figures32

suggest that Tiers 1 and 2 migrants account for only one percent of all movers acrossEngland and even in London the proportion is no more than 3.5 % in London.While these are very small numbers it can be argued that, especially in the areas ofReading and Milton Keynes they are large enough to have a direct effect onavailability and prices and to shift some housing from owner-occupation into theprivate rented sector. The impact on new supply depends on the expected priceelasticity of supply, which is itself very low.Table 18. Movers in London and England: Tier 2-type migrants and all moversRest ofLondonEnglandTotalAnnual number of mover395,4051,948,9972,344,402households (2007)Annual number of incoming14,23214,11428,346Tiers 1 and 2 householdsTiers 1 and 2 as % of all mover3.60.71.2householdsSource: LSE London analysis of EHS; Tables 1 and 2b of this report

Effects on demand for housing over time

The APS survey evidence does allow us, with many assumptions and based on pastexperience, to make a projection of the potential numbers of Tier 1 and Tier 2migrants who will require housing in different tenures over the years from first arrival.Table 19 starts from our assumption that around 30,000 main visas will be issuedand that some 76% of these individuals would form separate households. Thereafterthe changes in the numbers arise from both household formation and departuresfrom the country. The second generation of numbers has a large margin of errorbecause of the recent change in the mix of entrants, some of whom may very well beexpected to turn over rather more quickly than migrants who arrived in earlier years.As Table 19 shows, the longer migrants stay, the more likely they are to move intoowner-occupation. However, it also suggests that large numbers will leave aroundthe 4 to 5 year mark, and even more over the following 5 years. By year 20 afterarrival the percentage of migrants in owner occupation is above indigenousproportions but the numbers involved are projected to be only just over 10% of theoriginal total. In addition it should be noted that while there is some movement intosocial housing particularly after 2 years, the numbers are very small and decline.

33

Table 19: Tier 2 migrant households remaining by years after arrival

Housing tenure by year (000s of households)

Number ofyears afterarrival

Number ofTier 2migranthouseholds

owneroccupier

socialrenting

employerhousing

otherprivaterental

living withrelative orrent free

22.7

0.4

0.4

0.7

19.3

1.9

22.0

1.6

0.3

1.4

18.4

0.4

20.6

2.1

1.3

1.3

15.6

0.4

18.1

0.6

0.7

13.8

16.6

3.8

0.6

0.8

10.9

0.5

12.5

4.9

0.5

0.8

6.2

0.1

10

5.3

3.1

0.2

0.3

1.6

0.1

20

2.5

0.1

0.2

0.2

Projected

Source: LSE London calculations

Notes for Table 19

1. Years 0-5 based on 2004-2009 APS data for the sample of quasi-Tier 2migrants arriving from 2003 onwards2. Year 5 data actually based on (weighted averages) for those with 5 or 6 yearsresidence, since available sample is more restricted3. Migrant numbers for year 2 and onwards are based on a pattern of survivalrates for all employed/qualified non-EEA migrants with specific durations ofstay as derived from the 2004-2009 APS4. Household projections for years 10 and 20 are based on non-linearregressions of time trends in ratios and proportions up to year 6.Table 20 addresses the question of accumulation. It simply sums the number ofmigrants expected to be in the country with every passing year, using an assumedstart date of 2011/12 (it could be presented as in Table 19 as year 0, year 1 etc).The total numbers of Tiers 1 and 2 migrants in the country increase over time but at adecreasing rate as the impact of exit increases. In later years this exit element willbecome more important, as after ten years only about 10% of original entrantsremain. The implication is that Tiers 1 and 2 migration could lead to perhaps112,000 additional households in the country after 5 years although this takes noaccount of other effects such as a decline in overall household formation rates, partlyas a result of partnering and partly through housing market pressures.

34

Table 20: Total accumulation of Tier 2 migrant households up to 2017

(000s of households)000s of households resident by yearYear of visa issuance201220132014201520162011/1222.722.020.618.116.62012/1322.722.020.618.12013/1422.722.020.62014/1522.722.02015/1622.72016/17

201712.516.618.120.622.022.7

TOTAL

112.5

22.7

44.7

65.3

83.4

100.0

Source: LSE London calculations

The numbers entering owner-occupation up to 2017 remain low (Table 21). As on

this simple projection approach, 86% of migrants will still be in the private rentedsector, employer housing or living with friends and family (Table 22), the main impactwill be on rents. As already noted, even in London and Reading, the proportion of allmovers who are migrants remains small so while there will be an impact on rents it isnot likely to be large. In addition there might be some supply response within theexisting stock with conversion and reduced vacancy rates the most likely. There willalso be a small knock-on effect on house prices as units transfer into the rentedsector.Table 21: Accumulation of Tier 2 migrant households in owner-occupation upto 2017 (000s of households)000s of households in owner-occupationYear of visa issuance2012201320142015201620172011/120.41.62.13.03.84.92012/130.41.62.13.03.82013/140.41.62.13.02014/150.41.62.12015/160.41.62016/170.4TOTAL

0.4

2.0

4.1

7.1

10.9

15.8

Source: LSE London calculations

The direct effect on owner occupation will also be limited because of the smallnumbers involved. Indeed, one could reasonably argue that the impact of immigrationon prices is much less than the impact of demand from international non-residents,which currently accounts for maybe half of sales of all new-build dwellings in London.

employer, relatives or rent-free housing up to 2017(000s of households)000s of households in private rented housingYear of visa issuance2012201320142015201620172011/1221.920.217.314.512.27.12012/1321.920.217.314.512.22013/1421.920.217.314.52014/1521.920.217.32015/1621.920.22016/1721.9TOTAL

21.9

42.1

59.4

73.9

86.1

93.2

Source: LSE London calculations

The Reading Affordability Model (Meen et al, 2011) allows some guesstimate of theimpact of Tiers 1 and 2 migration on house prices overall and suggests it would addless (probably considerably less) than 1% to prices. This increase in demand willproduce some new supply but, given the very low measured price elasticities ofhousing supply and the slowness of response, it is likely to be in the low thousands ofdwellings. The overall outcome is therefore likely to be a limited impact on rents andrather less of an effect on prices - but resulting more in some increase in housingpressure rather than significant supply response.

36

8. Qualitative findingsInterviews were conducted with a number of key players involved in the relocation ofhighly skilled non-EU nationals into the UK in order to better understand the impact ofsuch migration on the UK housing markets. Interviewees were drawn from threegroups: residential letting agents; relocation agents working with international clientsand representatives of companies regularly involved in ICTs. Whilst each intervieweehad their own particular perspective according to location/company interest, etc., anumber of common themes can be identified.Geographical focusGeographically the main focus was on London because this had the majority both ofICTs of the companies contacted and of the relocation companies clients. As acontrast a secondary focus was provided by Aberdeen. Although both the relocationcompanies and the international companies moved people to other parts of the UK,no other population centre stood out in this particular sample.Respondents from all three groups reported that Americans continue to form thelargest group of non-EU migrants. Several interviewees noted that as a proportion ofthe total, Americans were gradually decreasing over time and other frequentlyidentified relatively large groups included Australians, South Africans, and migrantsfrom Hong Kong, Singapore and India. In the petrochemical industry an increase inthe number of South Americans was noted.Within particular companies the national groups concerned were, as expected,dominated by the location of the company HQ. Within the oil company the majority ofICTs are Americans with other national groups drawn largely from other countrieswith a significant oil industry that therefore have the necessary expertise or are theresult of international partnerships with firms from oil-producing countries. Within theIT consultancy, a global firm headquartered at Bangalore, India, 90% of the intracompany moves are from India with the remaining 10% drawn from a range ofcountries including Singapore, the US and Canada.Within the oil company most ICTs are to either London (where the company has twomain offices) or Aberdeen. At the IT firm approximately 60% of intra companytransfers are to London with a number of other centres across the UK, of whichReading is second to London. The range of locations partly reflects the fact that theiremployees are frequently assigned to work as consultants on a particular project andwork out of the clients offices.Intra-company migrantsAcross all interviewees the view was that the numbers of intra-company moves wasrelatively stable. There had been a reduction following the financial/banking crisis in2008 but numbers had recovered since then. To date the oil company had not felt theimpact of the recent economic turbulence but the IT firm noted that its averagemonthly figures for incoming ICTs had reduced by about 30% from its peak. Thecompany estimated that it is currently bringing in an average of around 40 ICTs permonth although some months, for example over the summer, it might be more like 70per month. For the oil company the figure was considerably lower at between 100and 150 per annum, excluding applications for extensions,37

All interviewees noted that the numbers of incoming migrants is not distributed evenlythroughout the year but said there are seasonal peaks and troughs. The main peaktakes place over the late spring and summer months largely between May andSeptember and is closely associated with the start of the school year; December andJanuary see relatively lower levels of movement. Other factors can impact onnumbers, for example, the oil company reported that it undertakes a biannual reviewof all staff across the world in order to plan moves, resulting in particularly busyperiods within the company in March/April and September/October and with theassociated moves taking place perhaps 4 or 5 months later.Most interviewees also gave a broadly consistent view of the proportion of singlemigrants compared to families with estimates fairly uniformly around 50/50. Tworelocation companies had slightly different experiences with one dealing with 60%single people versus 40% of families and the other seeing the other side of the coinwith 60% families versus 40% single people. It was not clear whether this wasassociated with the companies/business areas they represented, although it seemsthat the first company was helping to relocate a larger proportion of people in themiddle income bracket (80 - 90,000 p.a., from a range starting at around 40,000and going upwards).The length of stay inevitably varies considerably but it is clear that a large proportioncome for between 1 and 2 years. The IT firm reported that 70% of their ICTs willreturn to their home countries within this time period. Depending on the project anindividual is assigned to, some may come for longer and to provide continuity mayextend up to 5 years. One of the relocation agents noted a shift to shorterassignments: he had previously mainly been dealing with stays of 3 - 5 years but wasseeing an increasing trend towards 2 - 3 year assignments as well as a growingnumber of 6- to 12-month short-term assignments, a shift he attributed to greaterfocus on cost control.There were also variations in the duration of stay and the expectation that aspouse/family would accompany the assignee. For many, anything beyond a 6month stay meant that the family had the option to move too, for others 12 monthsappeared to be the cut-off. Where school age children were involved 12 monthsappeared to be more usual because of the potential educational disruption.For some benefits, there appears to be a dividing line at 24 months. For example fortransfers lasting up to 24 months, the oil company will take the lease on the propertyand pay all the bills directly (utility, council tax, TV subscriptions etc), whileemployees staying more than 24 months receive a housing allowance (plus otherallowances depending on the package) and takes the lease in his/her own name. Forassignments of this length the employee will also normally qualify for a preassignment visit. The distinction appears to be partly driven by tax advantages andpartly because where people are on shorter-term assignments it is simpler for thecompany to take on payments rather than set up short term accounts for individuals.For those ICTs who do not qualify for a pre-assignment visit the expectation is thatonce their assignment has been confirmed they will do a lot of their own research onthe internet and amongst colleagues to establish the types of properties, rents andlocations they are seeking. On transferring they are normally provided short-term/interim accommodation either in a hotel or a serviced flat for a set period of timeduring which they are expected to sort out their accommodation for the duration oftheir stay. For assignees from the IT firm this is a two-week stay in a hotel with alltheir food included, for others six weeks appears to be a common period to spend in38

a hotel/serviced flat and one relocation agent said that they dealt with a range ofdifferent company policies with 30, 45 and 90 days all being widely provided but 45days the most usual.Where employees qualify for a pre-assignment visit, they will have already liaisedwith the relocation agent to establish their domestic requirements, preferred location,need for access to schools etc. During the visit they expect to visit a number ofproperties and make a decision. All interviewees noted that it is currently a landlordsmarket fewer properties are available, and rapid decisions have to be made.Depending on circumstances regarding the lease, need for repairs etc the employeemay be able to move directly into the accommodation or may also need interimaccommodation. However, the expectation is that this will be short term.Types of properties soughtWith the variations within this group of ICTs such as age, marital status, nationality,employment status etc there are inevitably considerable differences in the types andlocations of properties sought, nevertheless certain common characteristics stand out.Above all the vast majority will rent and not buy property. Companies are seen toactively discourage buying which they see as restricting employee flexibility andmobility. If property prices fall they do not want to be responsible for any losses. Thesmall minority of migrants who buy were generally thought to be either Tier 1migrants, or people investing in their own right.Particularly within London the majority of migrants rent flats, and the most popularchoice is a block in a central location with porter/concierge service. Furnishedaccommodation is preferred, or at the very minimum partially furnished, particularlyfor those on shorter assignments; in general only those on assignments longer than24 months qualify for furniture shipment or a furnishing package.Two factors stand out as driving the locational choice: travel to work measured intime and/or cost rather than distance--and the availability of schools. For those withfamilies the location of either International or American schools is of considerableimportance particularly at secondary age. For younger children some localindependent or maintained-sector schools are seen as acceptable.Across all the interviews, there was no evidence that in ICTs the company expects toexert any control over the location chosen by its employees. In Aberdeen, for thosemigrants who choose to live outside the city centre the options were seen as limitedto two main areas to the west of the city for social and travel reasons.In the more complex London property market there is a wider range of destinations.Some variations are detected by nationality. Americans were cited as expecting morespace and larger rooms as well as being the most demanding in terms of internalfinish and fittings. Many inevitably have to compromise with a flat rather than a houseas initially expected. Koreans and Japanese were both cited as being particularlyprone to clustering in certain areas. The IT firm representative explained that themajority of their Indian transferees rent in the inner suburbs either around Ilford andEast Ham if based in the Canary Wharf office or Hounslow, Osterley, Wembley,Isleworth or Brentford if located in the Paddington office. His view was that most wishto tap into the existing Asian culture and food in these areas and that most were alsonot concerned with seeking particularly prestigious accommodation during theirassignment.39

Once an employee has selected and moved into the accommodation the expectationis that they will stay in the same accommodation for the duration of their assignmentunless forced to move by the landlord. In this case the company may cover the costof further removals/temporary accommodation but in other circumstances theindividual has to pay.One relocation agent estimated that the number of failed assignments where themigrant decides that the move has been a mistake and returns home before the endof the assignment -- may be as high as 10%.Employer contributionsIt was clear that some industries are more generous in the packages they provide fortheir employees than others. According to the relocation agents, as a rule of thumb,the packages provided by IT and consulting companies are least generous, bankingand large scale manufacturing more so, and pharmaceutical/petrochemicalcompanies most generous. It is also clear that within individual industries, thetransferees are well aware of the packages being provided by competitor companies.However, there was also a view that employers are constantly tightening up on thepackages over time. This was seen as both reflecting economic conditions and,associated with this, a greater expectation that an employee will be required torelocate maybe 2 or 3 times as part of his/her career rather than being requested tomove.The oil company reported that it reviews the packages provided to its ICTs twice ayear to take into account currency fluctuations and changing costs/purchasing powerin all of its locations. It uses one of a number of companies which have grown up totrack and provide this kind of data on a regular basis. These companies also monitorchanging regulatory frameworks within destination countries and advise on howemployee packages can best be structured.Leases and rentsEstate agents operating in central London and letting properties to incomingassignees or their companies noted that until recently 3-year premium leases wereoften favoured by companies. Recent tax changes means that these are no longerused and in the current market landlords would be anyway less acceptable. Nowmost leases are for one year with options to extend for a second or third year,although one agent estimated that approximately 10% of migrants will be looking for2 year leases. Where there is an option to extend the relocation agents expect tohave a minimum and maximum increase specified and tied to RPI.Whilst leases may be in the name of either the company or the employee, relocationagents noted that in industries where employees frequently move betweencompanies while on assignment, they prefer to take the lease in their own name tomake the opportunity to move company less disruptive.Many interviewees commented on the types of landlords that let to incoming migrants.Frequently the preferred landlord is someone making their own intra-company moveand letting out their property while they are away. Whilst some cases were cited ofcompanies investing in property particularly to meet the needs of intra-companymigrants this was not seen as a major source of supply, whereas the increasing40

investment in London property by overseas buyers has meant proportionately fewer

Competition and market pinch points

In both London and Aberdeen agents reported a growing shortage of suitable rentalproperties and resulting competition between potential tenants. In Central Londonagents reported that ICT migrants moving from outside the EU were not in generalcompeting with UK-based households for properties but rather with other similarmigrants, mainly because of the levels of rents they are prepared to pay. Migrantsmoving to London from an EU-based company tended to have less generouspackages and were more like to be competing for similar properties with Londoners.The level of competition among potential tenants and the shortage of suitableproperty coming forward for renting is leading to larger deposit requirements tosecure a property and growing anecdotal reports of rent for a year or more being paidupfront. Estate agents reported that some landlords are refusing to renew leases tocorporate tenants despite the security they offer as they can currently expect toincrease the rent sufficiently to cover any possible void periods.Despite the concerns about the current lack of suitable properties in both centralLondon and Aberdeen, the major area of concern amongst companies and relocationagents is in relation to the short-term or interim property market in the build up to the2012 Olympics. Whilst a number of companies specialise in the provision of shortterm serviced lets, it is already a tight market and demand is expected to rocket inthe months immediately before and during the Olympics. Hotels, which mightotherwise provide an alternative, were already reported in some cases to be fully41

booked. As a consequence it was stated that some companies have already decidednot to make any intra-company moves for several months around the Olympic periodand the oil company confirmed that it was likely to follow suit.Web surveyWe distributed a link to a web-based survey to 100 lettings agents and 100 salesagents in London, Aberdeen, Ipswich and Reading. Appendix B contains the text ofthe surveys. The response rate was very low, despite reminders; we received 10responses from lettings agents and just 2 from sales agents. All the responses werefrom London (W, SW and E). The respondents were unlikely to be aware of themigration status of their clients, so we asked about the housing preferences of nonEU relocators.Responses from lettings agentsNon-EU relocators clients made up at least 10% of the clientele for all agents whorespondedand in some cases over 75%. Most were looking to rent either furnishedflats or unfurnished houses, and most planned to stay between one and two years inthe rented property. There was no consensus about whether demand from suchclients affected local rent levels30% said yes and 70% said no. The most commonnationalities cited were American, Middle Eastern and Russian. Americans were feltto be particularly attracted to living in Chelsea and Kensington, Arabs toKnightsbridge and Mayfair, and Chinese to Canary Wharf.Responses from sales agentsThere were only two responses from sales agents, one from a firm covering SWpostcodes and the other from an office dealing with all of prime central London. Themost common nationalities dealt with were Chinese and Indians. Both of the agentswho replied said demand from non-EU relocators affected house prices in theirareas, although they did not provide detail about the magnitude of the effect.

42

9. ConclusionsThe numbers of Tiers 1 and 2 migrants are small in comparison to overall migrationflows. If the current visa regime remains in place, we estimate that about 30,000 newentrants per annum can be expected to enter the UK on Tiers 1 and 2 visas and toremain for more than one year. Including dependants, our estimate is that the totalnumber of migrants in these categories will be about 45,000 because the householdsare generally small; the average number of dependants per main migrant is 0.5.The figures in this report about future migration flows are estimates and theiraccuracy depends on the assumptions on which they are based. In particular theydepend on future developments in migration policy and the extent to which futuremigrants with similar attributes behave as earlier migrants have done. In this context,we have assumed that current and future cohorts of Tier 2 migrants will resembletheir predecessors under earlier visa regimes, in terms of income, the likelihood thatthey will remain in the country and their preferences as to housing type and tenure.It proved impossible to carry out much modelling of Tier 1 migrant households: theexceptional talent sub-tier did not exist before 2011, and for Tier 1 investors andentrepreneurs there were no data that we could use to tie them to location. Thenumbers involved are however very small (only 450 Tier 1 main visas were issued in2010/11).Tier 2 migrants will not be spread uniformly across the country but will beconcentrated in certain areas, particularly London and the South East, Ipswich,Aberdeen and Edinburgh. The London figures may overstate the concentrationbecause some firms may carry out their human resources and migration functionsthere but in fact deploy their intra-company transfers at locations elsewhere in the UK.But their attributes suggest particular concentration as compared to other types ofmigrant and our interviews with estate agents and relocation firms suggested thatsuch migrants do in fact cluster in London.Even in those local housing markets where they are concentrated, such migrants arelikely account for only a small percentage of those who move house in any givenyear (that is, of annual demand for housing). The highest percentage is in London,where they might account for about 3.5%. In the rest of England the figure is likely tobe below 1%.It is not only the annual number of arrivals that affects demand for housing, but alsothe way in which the total number of migrants accumulates over time. Each yearsome migrants will arrive and some will leave, but as those arriving outnumber thosewho leave the total figure will increase over time. By about 2017, based on theassumptions we have made, we estimate that there will be about 112,000 additionalhouseholds in the UK as a result of Tiers 1 and 2 migration in 2011 with similarnumbers in later years unless policy changes.Migrant households are overwhelmingly likely to rent housing when they first arrive,although the longer they stay in the UK the more likely they are to purchase a home.Those migrants who arrive without dependants (the majority) usually either live aloneor share with other adults, but over time more live separately, form larger householdsand require more space. Their effects on housing markets are undoubtedly strongestin the markets for private rented housing in those areas where migrants clusterandindeed, estate agents confirmed that migrants were often competing for such housing43

not with UK tenants but with other migrants. Even so, over time there will beincreasing demand for owner-occupied housing, which may affect the market incertain areas of high migrant concentration. Equally, over time some householdsmove into the larger housing market reducing concentrations and pressuresThis study looked particularly at the housing market effects of Tiers 1 and 2 migrants.Within the overall context of migration they represent a small minority. Most migrantsare from other EU countries (who are entitled to move to the UK without restriction),and they will have a very much stronger impact on housing markets than do Tiers 1and 2 migrants. In addition, there is significant demand for second and investmenthomes in the UK from wealthy overseas nationals who are not migrants. Particularlyin central London this is likely to have a greater effect on the housing market thandemand from Tiers 1 and 2 households.The demand from Tier 1 and 2 households is clearly very small as compared to thedemand from general household formation, which runs at between 275,000 and290,000 per annum in the UK overall. In addition, because of lower propensities toform household and their greater propensity to live in the private rented sector wheredensities are higher their impact on demand is initially disproportionately low. Overtime those who remain will increase their demands in line with indigenoushouseholds with similar attributes. So a particularly important issue for the housingmarket is what proportion of migrants stay in the country into the longer term. Ourestimates are based on comparable groups in the past. However, future behaviourmay well be very different.The impact even on local housing markets where there are particular concentrationsappears to be small both because of the relatively small proportion of transactionsaffected and because there appear to be submarkets especially for ICTs. Theimpact is concentrated on the rental sector with a small proportion becoming owneroccupiers but some transfer of stock from owner-occupation to renting. Supplyresponse depends more on the owner-occupied market than on rental demand and isanyway very inelastic. The overall impact will therefore continue to be more on rentsand prices. It is not insignificant but very small as compared to Europeanimmigration and indigenous demand.Overall these estimates can be no more than indicative. The administrative data areclear on numbers but provide very little additional information about the attributes ofmigrants and therefore their housing demands. Figures on outmigration areparticularly uncertain. Estimates based on past behaviour could prove inaccurateespecially in terms of turnover. However the fundamentals - that migrants form fewerhouseholds and consume less housing than their indigenous counterparts but cometo resemble the general population over time is unlikely to change.

44

Annex A: Requirements for Tiers 1 and 2 visas

UK visa routeTier 1 (ExceptionalTalent)

Annual limit(2011-12)1,000(700 in thefield ofscience; 300in the field ofarts).

RequirementsInitial entry:Applicant must hold an endorsement by aDesignated Competent Body.Extension:Applicant must be economically active(employed or self-employed) in his/herexpert field as previously endorsed by aDesignated Competent Body; and

Criteria / other details

Entry clearance is subject tothe following conditions:1. no recourse to public funds2. registration with the police,if required.3. no employment as a doctoror dentist in training or as aprofessional sportsperson.

Applicant must meet English language

requirement.Tier 1 (Investor)

None

Initial entry:Applicant must have 1 million of ownmoney at own disposal in the UK and heldin a regulated financial institution; orApplicant must own personal assets ofvalue exceeding 2 million AND have aloan from a regulated financial institutionof at least 1 million that is at owndisposal in the UK.Extension:Applicant still satisfies the requirements forgranting initial leave to remain; and45

Yes

3 years (atinitialclearance) + 2years (onextension).

Entry clearance is subject to

the following conditions:1. no recourse to public funds2. registration with the police,if required.3. no employment as a doctoror dentist in training or as aprofessional sportsperson.

Applicant has invested at least 750,000

in UK Government bonds, share capital orloan capital (not property investments) andinvested the remaining balance of 1million in a UK regulated financialinstitution; and

Tier 1(Entrepreneur)

None

The investment of at least 750,000 was

made within 3 months of the applicantsdate of entry into the UK or the date of theapplicants grant of entry clearance(depending on evidence available).Initial entry:Applicant has access to at least 200,000,or 50,000 from a registered venturecapital firm, seed funding organisation orUK government department. This moneymust be disposable in the UK and held inone or more regulated financialinstitutions.Applicant must also meet an Englishlanguage and maintenance requirement.Extension:Applicant has invested the funds declaredat initial entry (200,000 or 50,000) andis engaged in business activity at time ofapplying for extension. The applicant musthave been registered as self-employed, oras the director of a new or existing46

Yes

3 years (atinitialclearance) + 2years (onextension).

Entry clearance is subject to

the following conditions:1. no recourse to public funds2. registration with the police,if required.3. no employment other thanworking for the business orbusinesses that the applicanthas established, joined ortaken over.4. no employment as aprofessional sportsperson(including as a sports coach).

business, within six months of entering the

UK (or obtaining grant of entry clearance,depending on available evidence) andwithin the three months prior to applyingfor an extension.The applicants investment must havecreated at least two new full-time jobs forpersons settled in the UK, either throughthe creation of a new business or theexpansion of an existing one.

Applicant must also meet an English

language and maintenance requirement.Initial entry:Applicant must have been issued aCertificate of Sponsorship from asponsoring employer to fill a vacancy in anoccupation or job title on the UKgovernments Shortage Occupation List;andApplicant must have gross annualearnings from sponsor of at least 20,000or appropriate rate as per Code ofPractice (whichever is higher).ExtensionApplicant must hold a valid Certificate ofSponsorship for the continuing period andcontinue to satisfy the minimum earningsrequirement.47

Yes

3 years (atinitialclearance) + 2years (onextension).

Tier 2 ResidentLabour Market Test

extensions.

(1)

Initial entry:Applicant must have been issued aCertificate of Sponsorship from asponsoring employer to fill a vacancy in anoccupation or job title that is considered bythe UK government to be skilled to at leastlevel 4 of the National QualificationsFramework. The sponsor must havecarried out a Resident Labour Market Testfor this vacancy; and

Yes

3 years (atinitialclearance) + 2years (onextension).

No

3 years (atinitialclearance) + 2years (onextension).

Applicant must have gross annual

earnings from sponsor of at least 20,000or appropriate rate as per Code ofPractice (whichever is higher).

Tier 2 intracompany transfer

(longer term)

None

ExtensionApplicant must hold a valid Certificate ofSponsorship for the continuing period andcontinue to satisfy the minimum earningsrequirement.Initial entry:Applicant must have been issued aCertificate of Sponsorship from asponsoring employer to fill a vacancy in anoccupation or job title that is considered bythe UK Government to be skilled to atleast level 4 of the National QualificationsFramework.Applicant must have gross annualearnings from sponsor of at least 40,000,48

Applicant will not be able to

re-apply to return to the UKas an intra-company transferuntil 12 months after his/herlast leave as an intracompany transfer hasexpired.

including permitted allowances.

Tier 2 intracompany transfer

(shorter term)

Dependants (allTier 1 and Tier 2routes)

None

None

ExtensionApplicant must hold a valid Certificate ofSponsorship for the continuing period andcontinue to satisfy the minimum earningsrequirement.Initial entry:Applicant must have been issued aCertificate of Sponsorship from asponsoring employer to fill a vacancy in anoccupation or job title that is considered bythe UK government to be skilled to at leastlevel 4 of the National QualificationsFramework.Applicant must have gross annualearnings from sponsor of at least 24,000,including permitted allowances.Spouse or civil partner dependants mustbe aged 18 or over.Child dependants must be under the ageof 18 on the date of application and mustnot be considered to be married or in acivil partnership, have formed anindependent family unit or be living anindependent life.The main applicant must satisfy amaintenance requirement as demonstratethat they can support the dependant(s)49

No

1 year (atinitialclearance). Nopossibility ofextension.

Applicant will not be able to

re-apply to return to the UKas an intra-company transferuntil 12 months after his/herlast leave as an intracompany transfer hasexpired.

Yes

The period ofleave grantedreflects themainapplicantsleave toremain.

Family members have the

following conditions attachedto any period of leave:1. no recourse to public funds2. registration with the police,if required.3. no employment as a doctoror dentist in training, unlessalready qualified in relevantfield to degree level.

financially during their time in the UK.

Note: (1) Out-of-country applications for the shortage occupation route and the Resident Labour Market Test (RLMT) route are subject to anannual limit, thus the Certificates of Sponsorship (CoS) issued for this route are referred to as restricted. All applications for restricted CoSmust score a minimum of 32 points, which are awarded for the Tier 2 route being used to enter the UK and the salary offered by the vacancy.Higher salary bands are awarded a greater number of points. The Tier 2 routes are prioritised in the design of the points table such that, for anygiven salary, applications for the shortage occupation route are awarded the most points, followed by applications for PhD level vacancies viathe RLMT route, and finally all other RLMT applications. Further information on the prioritisation of applications for restricted CoS can be foundin the Tier 2 Statement of Intent: http://www.ukba.homeoffice.gov.uk/sitecontent/documents/aboutus/reports/soi-tier2/tier2-soi-transitionalmeasures?view=BinarySource: Home Office/UKBA websites

50

Annex B: Online questionnaires to estate agents:

August/September 2011SURVEY TEXT: Rental agentsWere interested in how international employees moving to the UK from outside theEU affect the housing market. The survey focuses on senior and mid-levelemployees, down to those earning 24,000 per year, who are looking to rent aproperty in the UK.Q1. What percentage of your clients are international relocators of the type describedabove?a)Less than 10%b)10-25%c)26-50%d)51-75%e)More than 75%Q2. Over the last three years have you seen a change in the proportion of non-EUinternational clients?a)The proportion has decreasedb)The proportion has increasedc)No change.Q3. What type of property do these clients most often look for? Please indicate thetwo most popular:1.House furnished2.House unfurnished3.Flat furnished4.Flat unfurnished5.Shared accommodation furnished6.Shared accommodation unfurnished7.Other (please specify)Q4. What is the most common household type among these international clients?1.Single2.Couples without children3.Couples with children4.Other (please specify)Q5. How many of these clients get help with their housing costs from their employer?1.Most2.Some3.Few4.Dont knowQ6. How long do most of these clients expect to stay in the property they arerenting?1.Up to six months2.Six months to a year3.One to two years4.More than two years51

Q7. Amongst your clients does one (or more) national group of non-EU internationalrelocators predominate? If YES, please list by nationality (in descending order offrequency)National group 1National group 2National group 3Q8. Do these national groups (from question 7) look for housing in particularneighbourhoods? If YES, please list the preferred neighbourhood(s) for each nationalgroupNational group 1National group 2National group 3Q9. Taken as a whole, do these non-EU international relocators form a large enoughgroup to impact on the housing market in your area?1.Yes, they contribute significantly to demand and the rental level2.To some extent but there is no clear impact on rents3.No, they are too few in number to affect the market.

Q10 Please provide the postal codes for the main areas your office covers (e.g.,London SW3, London SW7). You may list up to 5. Thank you so much for your time!

52

SURVEY TEXT: Sales agents

Were interested in how international employees moving to the UK from outside theEU affect the housing market. The survey focuses on senior and mid-levelemployees, down to those earning 24,000 per year, who are looking to buy aproperty in the UK.Q1. What percentage of your clients are international relocators of the type describedabove?1. Less than 10%2. 10-25%3. 26-50%4. 51-75%5. More than 75%Q2. Over the last three years have you seen a change in the proportion of non-EUinternational clients?1. The proportion has decreased2. The proportion has increased3. No change.Q3. In the area you cover, are the MAJORITY of these clients looking to buy (pleasechoose one box to fill in)Expensive property? (please give a typical range of values)Mid-level property?(please give a typical range of values)Low-price property?(please give a typical range of values)Q4 What is the most common household type among these international clients?1. Single2. Couples without children3. Couples with children4. Other (please specify)Q5. How many of these clients get help with their housing costs from their employer?1. Most2. Some3. Few4. Dont knowQ6. Who do you usually deal with when working with this particular group of clients?1.2.3.4.

The individual client directly

Their employer/HR departmentA relocation firmOther (please specify)

Q7. Amongst your clients does one (or more) national group of non-EU internationalrelocators predominate? If YES, please list by nationality (in descending order offrequency)National group 153

National group 2National group 3Q8. Do these national groups (from question 7) look for housing in particularneighbourhoods? If YES, please list the preferred neighbourhood(s) for each nationalgroup.National group 1National group 2National group 3Q9. Taken as a whole, do these non-EU international relocators form a large enoughgroup to impact on the housing market in your area?1. Yes, they contribute significantly to demand and price2. To some extent but there is no clear impact on prices3. No, they are too few in number to affect the market.

Q10. Please provide the postal codes for the main areas your office covers (e.g.,London SW3, London SW7). You may list up to 5. Thank you so much for your time!

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immigrants in Sheffield Sheffield Hallam Universityhttp://www.shu.ac.uk/_assets/pdf/cresr-PakistaniCommunityReport.pdfSaiz, A (2006) Immigration and housing rents in American cities Journal of UrbanEconomics 61(2) 345-371Saiz, A (2003) Room in the kitchen for the melting pot: Immigration and rental pricesReview of Economics and Statistics 85 (3), pp. 502521.Tribal Consulting (2008) Housing Migrant Workers: The Impact on Glasgow HousingAssociationhttp://www.gha.org.uk/content/mediaassets/doc/Housing_Migrant_Workers1.pdfUK Border Agency (2011) Tier 2 of the Points Based System: Statement of Intent,Transitional Measures and Indefinite Leave to Remainhttp://www.ukba.homeoffice.gov.uk/sitecontent/documents/aboutus/reports/soitier2/tier2-soi-transitional-measures?view=BinaryVargas-Silva, C (20110) Briefing; Migration Flows of A8 and other EU Migrants toand from the UK Migration Observatory, Oxford Universityhttp://www.migrationobservatory.ox.ac.uk/sites/files/migobs/Briefing%20%20Migration%20Flows%20of%20A8%20and%20other%20EU%20Migrants%20to%20and%20from%20the%20UK.pdfWandsworth Borough Council (2010) Report by the Director of Technical Serviceson the outcomes of the Migration Impact Fund project focused on legal migrants inPrivate Rented Housing Housing Overview and Scrutiny Committee 23rdNovember 2010Wayland, S (2007) The Housing Needs of Immigrants and Refugees in Canada ABackground Paper for the Canadian Housing and Renewal Association WaylandConsultingWhite, P (1998) The settlement patterns of developed world migrants in LondonUrban Studies 35(10), 1725-1744Whitehead, C (2011) Migration and its impact on housing costs in Marsden D (ed)Employment in the Lean Years ,Oxford, Oxford University PressWhitworth, S, Loukas, K and McGregor, K(2011) Statistical Bulletin February 2011:Mid 2009 short-term migration estimates for England and Wales, Office of NationalStatisticsWulff, M (2005) Immigrants and housing demand: International experiences fromCanada, Ireland, Hong Kong, Australia and the USA Urban Policy and Research, Vol23, no 3, 257-264